India and Fixing
the Employment Crisis!
data released on September 2018, India had the largest number of Internet
users (560 million) after China.
How could the
second most populous country solve the employment problem? A number of
international institutions believe that India has overcome the problem of
unemployment by developing the Internet and digitizing it. Although India’s
population has grown by more than 100 million since 2010, the unemployment
rate has not changed much. Of course, there are some doubts about the
definition of unemployment in India. Therefore, another indicator that can
show the labor market situation in the country is the per capita income, which
has grown by 77 percent from 2009 to 2017. One of the reasons for this
favorable performance has been the increasing share of IT. The IT share from
GDP has grown from about 1 percent in 1998 to 7.5 percent in 2012.
The employment generating pace in this sector
has been remarkable. The IT department and outsourcing processes alone have
created 550,000 to 600,000 jobs over the three-year period leading up to 2017.
Realizing this figure in other industries required more costs and more time.
India provided its young population with the use of the Internet and
communication technologies. This experience can be useful for countries
looking to solve the employment equation.
The job market in this century is rapidly
evolving. The advent of the Internet and virtual platforms has now made a big
difference in creating value added for companies. Today, the world’s leading
companies are expanding their businesses based on commerce and Internet
business. It goes without saying that nations and countries that are left
behind and continue to insist on creating old-fashioned jobs may be far behind
the economy of other countries. Creating Internet jobs based on what is known
as E-Commerce requires the establishment of Internet networks and easy and
cheap Internet access for people. One of the countries that have made great
strides in creating Internet employment over the past decade is India: A
country that was faced with widespread and deep poverty in the not too distant
past. But today, economic observers see a different image of India. According
to IMF projections India will become the world’s fifth economic power by 2019.
But how could India create an E-Commerce platform in a country with a closed
culture and deep poverty?
Digital India: Infrastructure Preparation
metrics and measuring standards, India is fast becoming a leading digital
country. Conditions are set for a sharp drop in Internet costs, increased
access to smartphones, and high-speed Internet connectivity. This has led
India to be seen as the fastest growing digital and Internet platform, a
country that is digitizing faster than many developed and emerging economies.
data released on September 2018, India had the largest number of Internet
users (560 million) after China.
The advances in Internet access and the growth
of Internet users have also had its economic impact. The share of Indian
adults with at least one digital financial account has more than doubled since
2011 to about 80%.
An analysis of 17 mature and emerging economies
finds India is digitizing faster than any other country in the study save
Indonesia—and there is plenty of room to grow: just over 40 percent of the
populace has an Internet subscription.
The list of these countries includes developed
countries including Sweden, UK, USA, Canada, Japan, Germany and France. The
Country Digital Adoption Index covers three elements: 1. digital foundation,
or the cost, speed, and reliability of Internet connections; 2. digital reach,
or the number of mobile devices, app downloads, and data consumption; and 3.
digital value, the extent to which consumers engage online by chatting,
tweeting, shopping, or streaming. India’s score rose by 90 percent between
2014 and 2017, second only to Indonesia’s improvement, at 99 percent, over the
same period. In absolute terms, India’s score is low, at 32 out of a maximum
100, comparable to Indonesia’s at 40, but significantly lagging behind the
four most- digitised economies of the 17: South Korea, Sweden, Singapore, and
the United Kingdom.
With more than
half a billion Internet subscribers, India is one of the largest and fastest-
growing markets for digital consumers, and the rapid growth has been propelled
by public and private sector alike.
60-65 Million Jobs by 2025
With more than half a billion Internet
subscribers, India is one of the largest and fastest- growing markets for
digital consumers, and the rapid growth has been propelled by public and
private sector alike. India’s lower-income states are bridging the digital
divide, and the country has the potential to be a truly connected nation by
2025. Much more growth is possible. As India’s digital transformation unfolds,
it could create significant economic value for consumers, businesses,
microenterprises, farmers, government, workers, and other stakeholders.
Digital adoption by India’s businesses has so
far been uneven, but new digital business models could proliferate across most
sectors. We find that core digital sectors such as IT and business process
management (IT-BPM), digital communication services, and electronics
manufacturing could double their GDP level to $355 billion to $435 billion by
2025, while newly digitising sectors (including agriculture, education,
energy, financial services, healthcare, logistics, and retail) as well as
digital applications in government services and labor markets could each
create $10 billion to $150 billion of incremental economic value in the same
period. Some 60 million to 65 million jobs could be created by the
productivity surge by 2025, although redeployment will be essential to help
the 40 million to 45 million workers whose jobs will likely be displaced or
transformed by digital technologies, based on our estimates.
In India’s new and emerging digital ecosystems
of the future—already visible in areas such as precision agriculture, digital
logistics management, and digital healthcare consultations—business will have
to find a new way to engage with customers. All Indian stakeholders will need
to gear up to capture the opportunities and manage the challenges of being a
Digital Leap Well Under Way
By many measures, India is on its way to
becoming a digitally advanced nation. Just over 40 percent of the populace has
an Internet subscription, but India is already home to one of the world’s
largest and most rapidly growing bases of digital consumers. It is digitising
activities at a faster pace than many mature and emerging economies.
India’s Internet user base has grown rapidly in
recent years, propelled by the decreasing cost and increasing availability of
smartphones and high-speed connectivity, and is now one of the largest in the
Digital services are growing in parallel.
Indians now download more apps—12.3 billion in 2018—than residents of any
other country except China.
The average Indian social media user spends 17
hours on the platforms each week, more than social media users in China and
the United States. The share of Indian adults with at least one digital
financial account has more than doubled since 2011, to 80 percent, thanks in
large part to the more than 332 million people who opened mobile phone–based
accounts under the government’s Jan-Dhan Yojana mass financial-inclusion
India’s digital surge is well under way on the
consumer side, even as its businesses show uneven adoption and a gap opens
between digital leaders and other firms. This report examines the
opportunities for India’s future digital growth and the challenges that will
need to be managed as it continues to embrace the digital economy.
Indian mobile data users consume 8.3 gigabits
(GB) of data each month on average, compared with 5.5 GB for mobile users in
China and somewhere in the range of 8.0 to 8.5 GB in South Korea, an advanced
digital economy. Indians have 1.2 billion mobile phone subscriptions and
downloaded more than 12 billion apps in 2018.
The public and private sectors are both
propelling digital consumption growth. The government has enrolled more than
1.2 billion Indians in its biometric digital identity programme, Aadhaar, and
brought more than 10 million businesses onto a common digital platform through
a goods and services tax.
Competitive offerings by telecommunications
firms have turbocharged Internet subscriptions and data consumption, which
quadrupled in both 2017 and 2018 and helped bridge a digital divide; India’s
lower-income states are growing faster than higher-income ones in Internet
infrastructure and subscriptions. Based on current trends, we estimate that
India will increase the number of Internet users by about 40 percent to
between 750 million and 800 million and double the number of smartphones to
between 650 million and 700 million by 2023.
sector has been one strong catalyst for India’s rapid digitisation. The
government’s effort to ramp up Aadhaar, the national biometric digital
identity programme, has played a major role. The Goods and Services Tax
Network, established in 2013, brings all transactions involving about 10.3
million indirect taxpaying businesses onto one digital platform, creating a
powerful incentive for businesses to digitise their operations.
At the same time, private-sector innovation has
helped bring Internet-enabled services to millions of consumers and made
online usage more accessible. For example, Reliance Jio’s strategy of bundling
virtually free smartphones with subscriptions to its mobile service has
spurred innovation and competitive pricing across the sector. Overall, data
costs have dropped by more than 95 percent since 2013: the cost of one
gigabyte fell from 9.8 percent of per capita monthly GDP in 2013 (roughly
$12.45) to 0.37 percent in 2017 (the equivalent of a few cents). Average
fixed-line download speed quadrupled between 2014 and 2017. As a result,
monthly mobile data consumption per user is growing at 152 percent
annually—more than twice the rates in the United States and China.
competition has helped bring down digital costs, thereby boosting usage. One
consequence of the competition and growing private-sector service offerings is
that data costs in India have plummeted by more than 95 percent since 2013,
providing a major impetus for continued growth in Internet access and usage.
Digital marketplaces, or online platforms that enable the sale of goods and
services, are changing labour market dynamics by creating new value chains of
workers linked to organised, digitally enabled businesses. E-Commerce in India
generates close to $20 billion in merchandise value annually and employs
between 150,000 and 200,000 people, mostly in goods delivery and logistics.
In line with
expected Internet penetration for India by 2025, McKinsey has estimated that
E-Commerce is likely to become four to six times its current size and could
create 500,000 jobs, based on today’s job intensity. Similarly, cab
aggregators such as Uber and Ola book three million to five million rides
daily, providing work for 600,000 to 700,000 drivers.
With the biggest 30 cities accounting for more
than 90 percent of their business, there is ample room to expand. In China,
the biggest cab operator, DiDi, books around 25 million rides per day and says
it provides flexible job opportunities for 21 million drivers.
Measuring the value that digital technologies
can create across sectors is at best an approximate science, based on a wide
range of variables. Nonetheless, the range of potential value that we find
across India’s economy from a full-on embrace of digital is significant.
While this value cannot be added up and
translated into GDP, the boost to growth that digital potentially offers is
substantial, and millions of jobs are at stake. Managing the transitions will
be challenging, especially in the labour market. One imperative for policy
makers and business leaders will be to retrain workers on an unprecedented
scale. But the accompanying opportunities may allow India to make a step
change in its economy, improving productivity, offering innovative solutions,
and enabling millions of ordinary Indians to find more fulfilling and
With both private- and public-sector action
promoting digital usage, India’s states have started bridging the digital
divide. Lower-income states are showing the fastest growth in Internet
infrastructure, such as base tower stations and the penetration of Internet
services to new customers. While low- and moderate-income states as a group
accounted for 43 percent of all base tower stations in India in 2013, they
accounted for 52 percent of the incremental towers installed between 2013 and
Low-income states like Uttar Pradesh, Madhya Pradesh, and Jharkhand were among
the five fastest-growing states in Internet penetration between 2014 and 2018;
Uttar Pradesh alone added more than 36 million Internet subscribers in that
Boosting Women Employment
The wave of digital transformation has also
empowered women in India by helping them find gainful employment, one area
where they lag behind women in poor countries. For example,
54,800 women have become village-level entrepreneurs at
government-run Common Service Centers, providing digital services to the local
population. In fiscal 2016, the Babajob portal recorded a sevenfold increase
in openings for female cab drivers and an increase of more than 150 percent in
women’s applications for driver jobs. The business process outsourcing (BPO)
industry in India employs approximately 4 million workers, about 30 percent of
A three-year awareness programme in rural India
on opportunities in the BPO industry enhanced women’s enrolment in training
programmes and increased school enrolment among girls by three to five
Prospects of Growth
transformation is under way and accelerating. The growth prospects that this
brings to the economy are potentially very substantial. To realise that
potential will require an embrace of digital and fleetness of foot among
companies, especially those lagging behind their peers. Even digital leaders
have room to grow. India’s government is trying to open a clear development
path with its Digital India initiative, which, among many other things, is
actively promoting the spread of digital infrastructure and the harnessing of
data and working to make broadband connectivity available in the poorest
states and most remote gram panchayats. Individual Indians have already
signalled their embrace of all things digital, as shown by the rapid growth in
data consumption over the past few years. Digital India is already a reality,
but an unfinished one. New efforts, new investment, and new imaginative feats
will be needed for the country to move to the next level of digital adoption
and secure a dynamic, technology-driven, and prosperous future.